- Disappointing Chinese macro data prompted fresh selling around AUD/USD on Monday.
- A softer risk tone is seen as another factor weighing on the AUD’s higher perceived risk.
- Falling US bond yields keep USD bulls on the defensive and help limit deeper losses in the pair.
The pair AUD/USD remains on the defensive and is trading around the 0.6920 level, losing around 0.25% on the day, before the start of the American session on Monday.
After an initial rally to the 0.6960 area, the AUD/USD pair found fresh selling and hit an intraday low around the 0.6890 area in reaction to macro data from China surprisingly weak. The data highlighted the damage caused by lockdowns due to COVID-19 in the world’s second largest economy and weighed on the Australian dollar.
Apart from China’s zero-covid policy, the war in Ukraine has fueled concerns about weakening economic growth amid prospects for a more aggressive tightening of monetary policy by the Fed. This, in turn, dampened investors’ appetite for perceived riskier assets, which was revealed in a more soft on equity markets and further weighed on the AUD.
The flow of risk aversion pushed the benchmark 10-year US government bond yield away from the recent high of 3.20%. This, in turn, kept US dollar bulls on the defensive and offered some support to the AUD/USD pair. Nonetheless, the fundamental backdrop supports prospects for an extension of the pair’s downtrend seen over the past month..
Market participants are now awaiting the release of the US Empire State Manufacturing Index for a further boost. The data, along with US bond yields, will influence the price dynamics of the dollar. Investors will be following signs of broader market risk sentiment to take advantage of short-term opportunities around the AUD/USD pair.
Next, attention will turn to the release of the Reserve Bank of Australia’s monetary policy meeting minutes on Tuesday and US retail sales and industrial production figures.
AUD/USD technical levels
Source: Fx Street
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